SEC Obtains Final Judgment Against CEO in Penny Stock Fraud Scheme

(HedgeCo.Net) The Securities and Exchange Commission obtained a final judgment against the former CEO of a penny stock company based in the Chicago suburbs, ordering the payment of more than $860,000 in monetary remedies. The SEC charged Andrew J. Kandalepas, the former CEO, President, and Chairman of the Board of Wellness Center USA, Inc. (Wellness), with making false and misleading statements in Wellness’s SEC filings and press releases and with manipulating the company’s stock.

According to the SEC’s complaint, filed April 12, 2018, Kandalepas took over $450,000 in unauthorized withdrawals from the company and then concealed his actions by causing Wellness to mischaracterize his withdrawals as salary, prepayments, or loans in false and misleading Forms 10-K and 10-Q. The complaint also alleged that Kandalepas caused the company to issue false and misleading press releases announcing non-existent sales of medical devices by the company. As detailed in the complaint, Kandalepas manipulated the market for Wellness stock through secret trading in a friend’s brokerage account that generated over $136,000 in proceeds, which Kandalepas misappropriated. The SEC further alleged that Kandalepas coordinated manipulative trading of Wellness stock with Wellness’s consultant and hired the consultant to solicit investments in Wellness as an unregistered broker.

The final judgment against Kandalepas entered by the United States District Court for the Northern District of Illinois orders Kandalepas to pay $593,363 in disgorgement, prejudgment interest of $113,554, and a civil penalty of $160,000. The court previously entered a consent judgment against Kandalepas imposing injunctive relief and barring Kandalepas from serving as an officer or director of a public company and from participating in penny stock offerings.